Millions to Band-Aid Subprime Disaster

Here's the latest news on the subprime cleanup front: "On Thursday Senator Charles Schumer (D-NY), chairman of the Senate's Housing Subcommittee introduced legislation to deal with a potential foreclosure crisis arising out of the subprime lending mess. In the legislation Schumer and co-sponsors Sherrod Brown (D-OH) and Bob Casey (D-PA) proposed that $300 million in federal funds and, Schumer said, 'hopefully even more private money,' would be channeled to community non-profit groups via the Department of Housing and Urban Development to boost refinancing programs to help homeowners prevent foreclosures. These funds, Schumer said, placed in the hands of community groups that specialize in foreclosure prevention 'will not only help hundreds of thousands of families save their homes, but it will save billions in spillover foreclosure costs. This seems like a cost-effective investment to me, and one that will help restore confidence in our shaky housing market.'"

Does that mean good old-fashioned responsible budget minded borrowers will be paying the cost of other less fortunate (or less debt savvy) borrowers?

Full story: http://www.mortgagenewsdaily.com/532007_Subprime_Mess.asp

Make sure you read the whole article, because the second part of the proposed legislation adds to an already overly regulated (but under-enforced?) industry. While the proposed legislation makes sense, it seems almost laughable that legislators are discussing adding anything to TILA without fixing the mess of problems TILA was intended to prevent. Here's one of the more common sense ideas: "Among the proposals is a standard for originators to assess a borrower's ability to repay a mortgage and holds lenders responsible for brokers and appraisers."

Yes, that sounds like a great idea, doesn't it? But there likely will be more gray areas than you can imagine. Definitions of terms won't add much clarity (think high cost loan calculations and definitions), and we'll have even MORE regulations to work through. It's like gas prices...add more compliance burden, and the cost per gallon/dollar will just keep going up.